By Mubasher Bukhari

LAHORE, Pakistan (Reuters) -Police have arrested two Christians accused of blasphemy in eastern Pakistan, a spokesperson said on Friday, two days after a Muslim mob burnt churches and houses in the minority's settlement, saying the two men had desecrated the Koran.

Paramilitary troops have been guarding the settlement in the eastern part of the country after the mob vandalised at least one main and four small churches and set scores of houses on fire.

A Christian graveyard was also desecrated in the vicinity, residents and the community leaders said.

Blasphemy is punishable by death in Pakistan and though no one has ever been executed, numerous accused people have been lynched by outraged mobs.

Caretaker Prime Minister Anwar ul Haq Kakar said on Friday that minorities have to be protected by all cost, promising to take action against those involved in violence.

"There won't be any favour. There won't be any fear," he said in his first Cabinet meeting telecast live.

The police said it has so far rounded up 128 people involved in the attack on the Christian community in Jaranwala in the industrial district of the city of Faisalabad on Wednesday.

The attack continued for more than 10 hours without any intervention by police who were at the scene, residents and community leaders said. Police have denied the accusation, saying security forces had prevented an even worse situation.

The residents said thousands of Muslims led by local clerics were carrying iron rods, sticks, knives and daggers during the rioting.

Hundreds of Christians had fled the settlement and took refuge in a nearby district.

The displaced families have started returning to their homes, Akmal Bhatti, a community leader, told Reuters.

Rights groups and Washington have called on Pakistani authorities to ensure the protection of minorities.

(Writing by Asif Shahzad; Editing by Kim Coghill)